Stock prices' interdependence during the south sea boom and bust
Stock prices' interdependence during the south sea boom and bust
This paper empirically investigates interdependence between major companies’ stock prices during the 1720 South Sea boom and bust. This was one of the first documented major financial crashes in the European market. Empirical tests are conducted by means of rolling coefficients, multivariate cointegration, rolling cointegration, and causality tests. Results indicate a substantial interdependence among the stock prices during the boom but not during the bust period. This result implies the failure of the efficient market hypothesis and the diminishing ability of the investors to reduce portfolio risk via diversification during the boom period. The causality test results provide ample evidence of short-term interaction between shares during the period of increasing prices.
628-641
Choudhry, Taufiq
6fc3ceb8-8103-4017-b3b5-2d38efa57728
October 2018
Choudhry, Taufiq
6fc3ceb8-8103-4017-b3b5-2d38efa57728
Choudhry, Taufiq
(2018)
Stock prices' interdependence during the south sea boom and bust.
International Journal of Finance & Economics, 23 (4), .
(doi:10.1002/ijfe.1640).
Abstract
This paper empirically investigates interdependence between major companies’ stock prices during the 1720 South Sea boom and bust. This was one of the first documented major financial crashes in the European market. Empirical tests are conducted by means of rolling coefficients, multivariate cointegration, rolling cointegration, and causality tests. Results indicate a substantial interdependence among the stock prices during the boom but not during the bust period. This result implies the failure of the efficient market hypothesis and the diminishing ability of the investors to reduce portfolio risk via diversification during the boom period. The causality test results provide ample evidence of short-term interaction between shares during the period of increasing prices.
Text
IJFE-paperv5
- Accepted Manuscript
More information
Accepted/In Press date: 20 June 2018
e-pub ahead of print date: 9 August 2018
Published date: October 2018
Identifiers
Local EPrints ID: 422061
URI: http://eprints.soton.ac.uk/id/eprint/422061
ISSN: 1076-9307
PURE UUID: a647a437-d20b-4201-a2c6-7f41042df6ae
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Date deposited: 13 Jul 2018 16:30
Last modified: 16 Mar 2024 06:47
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